Bratislava, 28 May 2013 – Pessimistic sentiments that stem mainly from the future macroeconomic uncertainty and external threats that may negatively influence companies persist among CFOs. A good sign is that the decrease in own costs no longer has the key role it had early last year. The maximisation of input effectiveness has practically become a daily routine and, following deep cleaning in their own ranks, companies are gradually directing their plans towards familiar markets that they are willing to utilise more fully. These are the findings of a survey carried out by Deloitte for the fourth time among CFOs from 13 countries of Central and Southeast Europe.

A rapid slowdown in the Polish economy and continuing negative pressures in the Czech Republic cause uncertainty in the entire region. While a positive mood persists in Baltic countries, Balkan economies again fell into negative moods following the recent slowdown.

The Slovak economy is expected to stagnate this year. No growth or a maximum growth of 1.5% is anticipated by 66% of Slovak CFOs, which is 30% more than in 2012. This decline in expectations can also be seen in the share of respondents anticipating economic recession. While recession in 2013 is predicted by 11% of CFOs, at the end of the last year just a minimal number of respondents considered this alternative.

The forecasted recession is also related to unemployment, about which 70% of CFOs in Slovakia are concerned. On the other hand, a decrease in unemployment is envisaged by an average of more than half of managers in the Baltic countries.

Concerns about growing unemployment also result in very high economic uncertainty in Slovenia and the Balkans. Slovak managers are also directly affected by the related changes in the Labour Code. Despite the fact that two thirds of companies are not expecting to see a reduction in jobs in this respect, the financial impacts of such changes worry as many as 75% of CFOs.

Financial prospects and planning in most companies underwent minor changes compared to last year as several large and stable players have a dominant position in the Czech Republic, Hungary, Romania and Slovakia.
Slovak companies can be evenly divided into three groups. The position of one third remains unchanged; approximately 6% more managers anticipate negative prospects, and moderate and significant improvement of their economic situation in the company is expected by 34% and 7% of respondents, respectively.

“According to the CFOs who participated in the survey, the principal interest of companies in the Slovak market over the next 12 months will primarily include increasing sales in existing markets, the so-called market penetration,” said Jozef Hýbl, Senior Manager in the Audit function at Deloitte Slovakia.
61% of CFOs indicated that this option is the most important or the second-most important area for their company. “Thus, companies will strive to maintain their position in the domestic market at all costs, which is likely to result in fiercer competition between major players. Compared to our surveys conducted in 2012, there has been a gradual reorientation of companies from their primary focus of reducing costs (both direct and indirect) to growth targets,” added Jozef Hýbl.

While potential restructuring of business activities is important for approximately one fifth of companies, as many as 39% of respondents consider this objective not a priority. Thus, the results underline the fact that, in 2013, the majority of companies will not make efforts to implement any major or potentially-risky projects that, in the case of their failure, would draw down the available corporate funds and may ultimately have fatal consequences.
Hungary and Slovenia are exceptions as more than a half of managers, especially in Hungary, due to the continuing decline of its economy, expect restructuring.

There were no significant changes in corporate financing in 2013. On the Slovak market, bank loans continue to be a more-suitable source of financing than an increase in equity. For 20% of CFOs, movements in equity are out of the question (in 2012: 16%). This result is traditionally affected primarily by a poor level of public trading in corporate debt securities and a highly-positive relationship with the banking model of financing.

In the coming period, the gearing level of companies is planned to be reduced according to 30% of CFOs, whereas in 2012 this option was envisaged by 24% of respondents.

“The survey results only prove the fact that, as regards the drawing of loans, CFOs do not anticipate more significant investments in the near future despite current bank interest rates’ being at record low levels,” said Zuzana Letková, Audit Partner at Deloitte Slovakia.

One of the issues feared by a third of respondents is the lack of a qualified and talented workforce. The greatest shortages in companies are anticipated at middle (42%) and senior levels (36%). Traditionally, the lowest points of concern are at the top-management levels and the numbers of recent graduates in economic sciences.

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Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms.